To support Mexico’s supreme audit institution, the ASF (Auditoría Superior de la Federación), in fulfilling its mandate, this report analyses good practices in OECD countries for incorporating governance issues into public works audits. It provides examples and assesses different strategic considerations for ASF’s infrastructure audit organisation and practices, including objectives and resources. Finally, it analyses infrastructure auditing practices in the context of emergencies.
Facilitating the Implementation of the Mexican Supreme Audit Institution’s Mandate
Auditing the Governance of Infrastructure
OECD Public Governance Reviews
Abstract
Executive Summary
Main findings
The G20 Principles on Quality Infrastructure Investment highlight that “sound infrastructure governance over the life cycle of a project is a key factor to ensure long-term cost-effectiveness, accountability, transparency, and integrity of infrastructure investment”.
Given the need to improve both the levels of infrastructure investment and the quality of its infrastructure, Mexico cannot afford to lose any resources to corruption or mismanagement. Indeed, the core functions of Mexico’s Superior Audit of the Federation (Auditoría Superior de la Federación, ASF) include auditing public works and infrastructure spending; however, it has traditionally concentrated on the financial side; analysing the governance of infrastructure is hence a major opportunity to improve the broader impact of infrastructure projects.
While the legal framework grants ASF the powers to audit public works, such audits take place ex post and there is no explicit reference to the wider governance of infrastructure as a key enabler of the success of projects. ASF does not usually audit and review infrastructure projects at the project preparation or investment appraisal stages; it tends to concentrate on the tendering, execution, and contract management stages, and to some extent on the evaluation stage. Indeed, the orientation of the legal mandate influences the scope and focus of ASF’s audits, hindering a broader approach that could steer ASF’s strategies and policies.
Another feature of ASF’s audits of public works is that they are compliance-oriented, i.e., they aim to ensure compliance with the legal framework, but they do not necessarily focus on achieving value for money. In addition, the compliance-oriented approach focuses on identifying irregularities and correcting damages, instead of on preventing those irregularities and damages from occurring in the first place. A wider governance approach to infrastructure audits would facilitate prevention by, for example, defining accountability and control mechanisms throughout the different layers of management of a project. In addition, assessing the transparency and disclosure measures of infrastructure projects could prevent the undertaking of projects with weak social and economic justifications.
Limitations on carrying out real-time audits force ASF to be more reactive than proactive, which also limits its ability to take preventive action or conduct audits before receiving complaints. But being able to do so would help strike a better balance between prevention and the long-term success of infrastructure projects, on the one hand, and sanctioning, on the other, and promote early interventions. Real-time audits in infrastructure would not only help prevent risks of ineffective use of resources or plain corruption, but would also allow ASF to play a role in ensuring that infrastructure projects are planned and designed for success from the early stages.
ASF follows the same process for conventional infrastructure audits as for audits during emergencies, except for the planning stage. Infrastructure audits during emergencies can produce strategic insights and foresight, contributing to good governance and well-being in three ways: i) assessing risks; ii) upgrading preparedness and crisis management practices; and iii) documenting lessons learned during emergencies.
Recommendations
Even though the legal framework grants ASF wide powers to audit infrastructure, such audits tend to be compliance oriented and do not pay enough attention to achieving value for money and other wider governance issues:
ASF could promote the review of its regulatory framework to explicitly mandate it to audit the governance of infrastructure projects taking a comprehensive, whole-investment-cycle approach.
ASF could raise the issue with the Legislative Commission for ASF Oversight so that legislators recognise the potential for a reform.
ASF could better balance its focus on corruption prevention and the long-term success of infrastructure projects:
ASF could assess the degree of transparency of the different impact and feasibility studies used to select specific infrastructure projects.
ASF could undertake a gap analysis to understand the resources and technologies required to fulfil its strategic objectives relative to auditing infrastructure governance:
It is important to have an assessment of the resources and equipment required to deepen the work on infrastructure governance and meet strategic objectives, particularly on elements such as performance and resilience.
ASF could carry out such an assessment and develop an investment plan aligned with the goal of widening the portfolio of infrastructure audits.
The same kind of gap analysis is pertinent for human resources, not only in terms of staff numbers, but also of capacities and skills. ASF should pursue the following actions:
Allow for the establishment of multidisciplinary working groups to advance comprehensive audits.
Train and certify staff on infrastructure auditing and implementation of audit techniques following international standards.
Real-time audits would allow ASF to intervene in a timely way at the different stages of infrastructure projects:
Congress should review ASF’s legal framework and expand its powers to undertake real-time audits, particularly on infrastructure.
ASF could apply criteria on the impact on well-being to select infrastructure audits:
ASF could select infrastructure audits based on their contribution to the well-being of citizens and incorporate such contributions in the estimation of its benefits.
ASF could review its infrastructure audits during emergencies to make sure they provide insight and foresight in terms of resilience and preparedness.
ASF could develop a framework tailored to emergencies for infrastructure audits, aiming to build a portfolio that achieves balance between the timeliness of public responses and an adequate level of accountability and control:
The framework should consider audit standards and guidelines to be used during emergencies, particularly on remote auditing and the transparency of emergency works procurement. It should also pay attention to criteria such as the “no harm” principle, comprehensiveness, and timeliness.
Real-time infrastructure audits are particularly relevant in emergencies and should be part of ASF’s portfolio to control risks and maximise its deterrent effect:
ASF should anticipate the resources needed to facilitate quick reporting and useful feedback to the infrastructure agencies responding to crises.
Real-time infrastructure audits in emergencies are powerful means to maximise the deterrent effect of audits and send a clear message that abuse will not be tolerated.
